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Why Is ABM Industries (ABM) Down 0.3% Since Last Earnings Report?

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A month has gone by since the last earnings report for ABM Industries (ABM - Free Report) . Shares have lost about 0.3% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is ABM Industries due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

ABM Industries Surpasses Q2 Earnings Estimates

ABM Industries reported mixed second-quarter fiscal 2022 results, with earnings beating the Zacks Consensus Estimate while revenues lagging the same.

Adjusted earnings from continuing operations came in at 89 cents per share, beating the consensus mark by 6% and increasing 8.5% year over year. The bottom line benefited from increased operating earnings on higher revenues and the benefits of one less work day. These were, however, partially offset by the impact of a decline in the volume of higher-margin virus protection services and work orders, as well as higher costs.

Total revenues of $1.89 billion missed the consensus estimate by 1% while improving 26.7% from the year-ago level. The upside was backed by solid demand across the company’s Business & Industry, Aviation, Manufacturing & Distribution, and Technical Solutions segments, especially in its eMobility business. Quarterly revenue growth includes 7.5% organic growth and 19.2% from acquisitions.

Quarterly results benefited from contributions from acquisitions, solid demand for the company’s core janitorial services, and continued recovery in the aviation industry. These were, however, partially offset by the expected decline in disinfection-related work orders and EnhancedClean services.

Segment-Wise Revenues

Business & Industry revenues increased 48.9% year over year to $1.00 billion. Manufacturing & Distribution revenues inched up 4.9% year over year to $356.9 million. Aviation revenues increased 27.4% year over year to $185.9 million. Technical Solutions revenues increased 18.1% year over year to $147 million.  

Education revenues of $204.4 million, however, decreased 3.9% from the prior-year quarter.

Operating Results

Adjusted EBITDA came in at $118.9 million compared with $106.6 million in the year-ago quarter. Adjusted EBITDA margin was 6.5% compared with 7.4% in the year-ago quarter.

Operating expenses increased 29.3% from the year-ago figure to $1.65 billion. Selling, general and administrative expenses declined 3.1% from the year-ago level to $156.8 million.

Balance Sheet & Cash Flow

ABM Industries exited second-quarter fiscal 2022 with cash and cash equivalents of $48.9 million compared with $46.6 million at the end of the prior quarter. Long-term debt was $986.6 million compared with $971.9 million at the end of the prior quarter.

Net cash used in operating activities totaled $43.9 million for the reported quarter. Free cash flow came in at $53.9 million.

Dividend Payout & Share Repurchase

ABM Industries’ board of directors declared a quarterly cash dividend of 19.5 cents per share. The dividend will be paid on Aug 1, 2022 to stockholders of record as of Jul 7, 2022. This marked the 225th consecutive quarterly cash dividend by the company.

During the reported quarter, the company repurchased 0.7 million shares at an average price of $43.5, for a total cost of $30 million.

Fiscal 2022 Guidance

For fiscal 2022, ABM Industries reaffirmed its guidance for adjusted income from continuing operations, which is expected to be in the range of $3.50-$3.70 per share

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

At this time, ABM Industries has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, ABM Industries has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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